Gaming the Obamacare system leading to sky-high premiums

The president's State of the Union address will no doubt have a lot to say about the "success" of Obamacare. Millions have signed up; millions more are enrolled in the expanded Medicaid program.

This much is true. But just about anything else he says about Obamacare will be a lie. The promise that they would bend the health care cost curve down is by the boards. The promise that health insurance would be "affordable" is a joke.

And there may be hundreds of thousands – perhaps millions – of customers who are gaming the system by signing up for coverage when they're sick and then exiting their insurance plan when they don't need it anymore.

Obamacare customers are gaming the system, buying coverage only after they find out they’re ill and need expensive care — a trend insurers warn is destabilizing the fledgling health law marketplaces and spiking premiums for everyone.

Insurers blame the problem on lax rules that allow more than 900,000 people to sign up for coverage outside the standard enrollment season — for instance, when they change jobs or move — without sufficient proof they are eligible. No one knows precisely how many might be manipulating the system, but the plans say they run up much higher medical bills and then jump ship, contributing to double-digit rate increases and financial losses.

Health plans also complain some customers are exploiting a three-month "grace period" — when they can keep getting subsidized coverage even if they’ve stopped paying their share of premiums.

Both those trends make the risk pools skew toward sicker, costlier customers — and under Obamacare, plans can no longer deny coverage to those with expensive medical conditions. That problem has been exacerbated by the large numbers of healthier people who are choosing to stay uninsured rather than shell out money for coverage.

The issue represents a huge challenge for the Obama administration, which faces a delicate balancing act in regulating the exchanges. On the one hand, it wants as many people as possible to sign up for coverage since that's the main goal of the Affordable Care Act. But it also needs to make sure that the insurance companies see the exchanges as worthwhile markets in which to compete.

In a speech Monday night, Andy Slavitt, acting administrator for the Centers for Medicare & Medicaid Services, which oversees the exchanges, acknowledged the problems and said the administration would tighten the rules for special enrollments — and terminate coverage for those who found to have signed up improperly.

It's not a question of "tightening the rules." The back-end of the healthcare.gov website is still not complete and may never perform the way the administration portrayed it five years ago. The IRS is still not able to communicate with health insurance companies to confirm information like a job change or change of address. Companies are forced to take a leap of faith when a customer receives a subsidy as a result of those life changes.

Last year, I had 11 choices of plans in Illinois (I'm not eligible for a subsidy). This year, I had 4. And the plan I was on last year was dropped. My premium – for less coverage and twice the deductible – went up 15%.

I was lucky. Check the table below that shows the spike in premiums this year – increases in 49 of 50 states.

Seventeen states will see an average premium increase of 20% or more.

The president will crow about the 11 million people who've signed up for insurance during the open enrollment period. But as usual, more than half of those people will be Medicaid enrollees – most of whom are already eligible for the program and are not benefiting from the expanded Obamacare mandate. As for the rest, how many are gaming the system as described above? Because of the incompetence and general lack of interest in catching the fraudsters, we'll never know.

The president's State of the Union address will no doubt have a lot to say about the "success" of Obamacare. Millions have signed up; millions more are enrolled in the expanded Medicaid program.

This much is true. But just about anything else he says about Obamacare will be a lie. The promise that they would bend the health care cost curve down is by the boards. The promise that health insurance would be "affordable" is a joke.

And there may be hundreds of thousands – perhaps millions – of customers who are gaming the system by signing up for coverage when they're sick and then exiting their insurance plan when they don't need it anymore.

Obamacare customers are gaming the system, buying coverage only after they find out they’re ill and need expensive care — a trend insurers warn is destabilizing the fledgling health law marketplaces and spiking premiums for everyone.

Insurers blame the problem on lax rules that allow more than 900,000 people to sign up for coverage outside the standard enrollment season — for instance, when they change jobs or move — without sufficient proof they are eligible. No one knows precisely how many might be manipulating the system, but the plans say they run up much higher medical bills and then jump ship, contributing to double-digit rate increases and financial losses.

Health plans also complain some customers are exploiting a three-month "grace period" — when they can keep getting subsidized coverage even if they’ve stopped paying their share of premiums.

Both those trends make the risk pools skew toward sicker, costlier customers — and under Obamacare, plans can no longer deny coverage to those with expensive medical conditions. That problem has been exacerbated by the large numbers of healthier people who are choosing to stay uninsured rather than shell out money for coverage.

The issue represents a huge challenge for the Obama administration, which faces a delicate balancing act in regulating the exchanges. On the one hand, it wants as many people as possible to sign up for coverage since that's the main goal of the Affordable Care Act. But it also needs to make sure that the insurance companies see the exchanges as worthwhile markets in which to compete.

In a speech Monday night, Andy Slavitt, acting administrator for the Centers for Medicare & Medicaid Services, which oversees the exchanges, acknowledged the problems and said the administration would tighten the rules for special enrollments — and terminate coverage for those who found to have signed up improperly.

It's not a question of "tightening the rules." The back-end of the healthcare.gov website is still not complete and may never perform the way the administration portrayed it five years ago. The IRS is still not able to communicate with health insurance companies to confirm information like a job change or change of address. Companies are forced to take a leap of faith when a customer receives a subsidy as a result of those life changes.

Last year, I had 11 choices of plans in Illinois (I'm not eligible for a subsidy). This year, I had 4. And the plan I was on last year was dropped. My premium – for less coverage and twice the deductible – went up 15%.

I was lucky. Check the table below that shows the spike in premiums this year – increases in 49 of 50 states.

Seventeen states will see an average premium increase of 20% or more.

The president will crow about the 11 million people who've signed up for insurance during the open enrollment period. But as usual, more than half of those people will be Medicaid enrollees – most of whom are already eligible for the program and are not benefiting from the expanded Obamacare mandate. As for the rest, how many are gaming the system as described above? Because of the incompetence and general lack of interest in catching the fraudsters, we'll never know.